Breaking Down Autoliv, Inc. (ALV) Financial Health: Key Insights for Investors

You're looking at Autoliv, Inc. (ALV)-the worldwide leader in passive safety systems-and you need to know if their operational resilience is translating into real shareholder value in this volatile auto market. The quick answer is yes, they are executing well, but the regional mix still matters. The company is guiding for a full-year 2025 adjusted operating margin between 10% and 10.5%, and they expect to deliver approximately $1.2 billion in operating cash flow, which shows a strong focus on capital efficiency. Honestly, that 10.0% adjusted operating margin in Q3 2025, achieved on record quarterly net sales of $2.71 billion, is a solid indicator they are managing costs and successfully passing on tariff burdens to customers. Still, while organic sales growth is projected at around 3% for the year, you need to dig into the China market-where they are underperforming overall-to see if their record number of new product launches there will defintely close that gap and sustain their momentum.

Revenue Analysis

You want to know where Autoliv, Inc. (ALV)'s money is coming from and how fast it's growing. The direct takeaway is this: Autoliv is a pure-play passive safety giant, and while their full-year organic sales growth for 2025 is projected at a solid 3%, the real story is the geographic shift and their success in passing on costs.

For the twelve months ending September 30, 2025, Autoliv's trailing twelve months (TTM) revenue was approximately $10.61 billion, representing a year-over-year increase of about 0.85%. This growth rate is slower than what we've seen in some prior years, but it's defintely stable, especially considering the volatility in global light vehicle production (LVP).

Core Revenue Streams and Product Focus

Autoliv's revenue is nearly all concentrated in one area: Motor Vehicle Safety and Security Systems. They don't have a complex mix of services or non-automotive segments to worry about. It's a focused business model, which you can read more about in their Mission Statement, Vision, & Core Values of Autoliv, Inc. (ALV).

The company's primary revenue sources are the essential components that keep car occupants safe.

• Airbags (frontal, side-impact) and Airbag Inflators
• Seat Belts and components
• Steering Wheels

Looking at the prior fiscal year, the Airbag and Steering Wheels product group alone accounted for around $7.02 billion in revenue, which shows you the sheer scale of that segment's contribution. This concentration means you're investing in the core, non-negotiable safety technology of the global auto industry.

Geographic Revenue Contribution and Growth Drivers

The regional breakdown is where you see the near-term opportunities and risks. While Autoliv is a global supplier, its performance varies significantly by geography. In Q3 2025, the company reported net sales of $2,706 million, a strong 5.9% increase year-over-year. This growth wasn't uniform.

Here's the quick math on where the sales concentration was in 2023, which is a good proxy for the current distribution:

The big change is their success in the Chinese market with local Original Equipment Manufacturers (OEMs). That 8 percentage point outperformance in Q3 2025 is huge; it means their new product launches are finally gaining traction with domestic automakers, which is a key long-term growth lever. Also, they've been very effective in managing external headwinds, specifically recovering about 75% of U.S. tariff costs in Q3 2025, which added around 0.5 percentage points to sales growth. That's operational excellence in action.

Profitability Metrics

You need to know if Autoliv, Inc. (ALV) is making money efficiently, especially when the auto supplier sector is under pressure. The direct takeaway is this: Autoliv, Inc. is a clear outperformer in its industry, with its operating margin more than doubling the sector average, but you need to watch the gross margin trend closely.

For the trailing twelve months (TTM) leading up to November 2025, Autoliv, Inc. reported a revenue of over $10.61 billion, showing robust scale. The company's profitability ratios demonstrate a premium position compared to the broader automotive supplier market, which is struggling with cost inflation and stagnant volumes. Honestly, their ability to maintain these margins in a tough environment is impressive.

• Gross Margin (TTM/Estimate): Around 19%.
• Operating Margin (TTM): 10.57%.
• Net Margin (TTM): 7.09%.

Comparison with Industry Averages

Autoliv, Inc.'s profitability is structurally stronger than its peers, which is a major competitive advantage. The average Earnings Before Interest and Taxes (EBIT) margin-a close proxy for Operating Margin-for the global automotive supplier industry is projected to be just around 4.7% for 2024, with only a marginal improvement expected in 2025.

Here's the quick math: Autoliv, Inc.'s TTM Operating Margin of 10.57% is more than double the industry's average of 4.7%. This gap signals that Autoliv, Inc. commands better pricing power, operates a more efficient cost structure, or both. The company's full-year 2025 adjusted operating margin guidance is between 10.0% and 10.5%, which keeps them firmly in the top tier of suppliers.

Operational Efficiency and Margin Trends

The company is defintely executing well on cost management, but there are near-term margin pressures you need to be aware of. In the third quarter of 2025, Autoliv, Inc. saw a significant year-over-year increase in key profit metrics, with operating income growing by 18% to $267 million and gross profit growing by 14%. This was driven by organic sales growth and successful execution of cost reduction programs.

A major part of their operational efficiency story is their ability to manage geopolitical costs. They successfully recovered around 75% of U.S. tariff costs in Q3 2025, expecting to recover most of the remainder by year-end. This is critical because it protects the bottom line from external shocks. Still, you should note the management's decision to cut its full-year gross margin guidance following a negative gross margin performance in Q3 2025, which suggests persistent cost pressures from the supply chain or production inefficiencies. This is the short-term risk to monitor.

To understand the strategic foundation underpinning these numbers, you should review the Mission Statement, Vision, & Core Values of Autoliv, Inc. (ALV).

Debt vs. Equity Structure

Autoliv, Inc. (ALV) maintains a balanced capital structure, leaning slightly more on equity than the broader auto parts industry, which is a good sign for a capital-intensive business. As of the third quarter of 2025, the company's debt-to-equity (D/E) ratio stood at 0.86, meaning for every dollar of shareholder equity, Autoliv uses 86 cents of debt to finance its assets. This is a conservative, defintely manageable level.

To be fair, Autoliv's 0.86 D/E ratio is higher than the current 'Auto Parts' industry average of 0.58, but it aligns almost perfectly with the company's historical median of 0.85. The key takeaway here is stability; they are not aggressively leveraging up. Their net leverage ratio (Net Debt/Adjusted EBITDA) of 1.3x as of Q3 2025 is also comfortably below their internal target limit of 1.5x, showing management's commitment to keeping financial risk in check. You can dig deeper into the shareholder base in Exploring Autoliv, Inc. (ALV) Investor Profile: Who's Buying and Why?.

Here's the quick math on their core debt components for the quarter ending September 2025, which totaled approximately $2.19 billion in gross debt:

• Short-Term Debt & Capital Lease Obligation: $698 million
• Long-Term Debt & Capital Lease Obligation: $1,492 million
• Total Stockholders Equity: $2,549 million

The company is strategic about how it uses debt to fund growth and innovation. A significant recent move was the issuance of a EUR 300 million (roughly $314.28 million USD) Green Bond in October 2025. This debt is specifically earmarked for financing projects that support clean transportation and the de-carbonization of operations, which is a smart way to attract ESG-focused capital while funding long-term strategic initiatives.

Autoliv balances its financing needs through a mix of debt and equity, but the Q3 2025 balance sheet shows a clear preference for maintaining a strong equity base relative to their debt load. The recent debt issuance is a non-dilutive way to raise capital, but the company also continues to return value to shareholders via dividends and share repurchases, which is a classic balancing act for a mature company in a cyclical industry.

Liquidity and Solvency

You need to know if Autoliv, Inc. (ALV) can cover its near-term bills, and the 2025 numbers show a tight, but managed, liquidity position that is heavily reliant on strong cash generation. The company's current and quick ratios are below the traditional 1.0 benchmark, but their projected operating cash flow for the year is a massive strength.

A quick look at the balance sheet for the most recent period shows Total Current Assets of $3,946 million against Total Current Liabilities of $4,141 million. This gives Autoliv, Inc. a Current Ratio of just 0.95, or 0.93 as reported by some analysts. That means for every dollar of short-term debt, the company has only 93 cents in assets that can be converted to cash within a year. This is defintely a point to watch.

The Quick Ratio (Acid-Test Ratio), which strips out inventory-since airbags and seatbelts aren't always quick to sell in a pinch-is even lower at 0.70. Here's the quick math: Current Assets ($3,946 million) minus Inventory (around $1,040 million) leaves Quick Assets of $2,906 million. Dividing that by Current Liabilities ($4,141 million) gives you the 0.70. A ratio below 1.0 suggests a reliance on inventory sales or future cash flow for immediate obligations. It's a classic manufacturing sector challenge, but it still means they're running lean.

The result of these ratios is a negative Working Capital (Current Assets minus Current Liabilities) of ($195 million). This trend of negative working capital has been consistent, but the company is managing it by optimizing its operations and focusing on cash conversion. In fact, their strong balance sheet control helped them keep their leverage ratio (debt-to-equity) at a healthy 1.3x in the third quarter of 2025, well below their internal target limit of 1.5x.

The real story for Autoliv, Inc.'s financial health isn't on the balance sheet; it's in the cash flow statement. This is where the company's operational efficiency shines and mitigates the low liquidity ratios. They are guiding for a full-year 2025 Operating Cash Flow of around $1.2 billion, which is a powerful number. This cash generation is the engine funding their operations and strategic moves.

Here is an overview of the cash flow trends:

• Operating Cash Flow (OCF): The full-year guidance of $1.2 billion is the primary strength. The third quarter of 2025 OCF was $258 million, a 46% increase year-over-year, driven by improved profit and working capital management.
• Investing Cash Flow: Capital expenditure (CapEx) guidance for 2025 was revised to around 4.5% of sales, indicating continued investment in the business, but at a controlled pace. This lower CapEx, net, helped substantially improve Free Operating Cash Flow, which hit $153 million in Q3 2025.
• Financing Cash Flow: The company is confidently returning capital to shareholders. They increased the quarterly dividend to $0.85 per share in Q3 2025 and repurchased $100 million in shares during that same quarter.

The takeaway is this: While the low Current and Quick Ratios signal a structural liquidity concern-you can't pay a bill with inventory that hasn't sold-the massive, projected $1.2 billion in operating cash flow for 2025 acts as a powerful offset. They are managing a tight balance sheet with exceptional cash generation. For more detail on the company's overall strategy, check out Breaking Down Autoliv, Inc. (ALV) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking at Autoliv, Inc. (ALV) right now and asking the right question: is this stock priced fairly, or is the market missing something? The short answer is that Autoliv appears to be undervalued based on traditional metrics and current analyst consensus, especially when you look at its performance through the 2025 fiscal year.

As a global leader in automotive passive safety, Autoliv's valuation is currently reflecting strong operational efficiency and a solid balance sheet. The company's leverage ratio stood at a healthy 1.3x in Q3 2025, which is well below their target limit of 1.5x.

Here's the quick math on why Autoliv, Inc. (ALV) looks compelling right now:

• Trailing Price-to-Earnings (P/E) Ratio: Around 12.4x
• Forward P/E Ratio: Approximately 11.6x
• Enterprise Value-to-EBITDA (EV/EBITDA): Around 7.4x

To be fair, a P/E of 12.4x is low compared to the broader market, but it's a sign of a cyclical automotive sector stock that is executing well. The forward P/E of 11.6x suggests analysts expect earnings growth to outpace the share price, a classic sign of a potentially undervalued stock. For context, the EV/EBITDA of 7.4x is also quite reasonable for a mature industrial company with strong cash flow.

Stock Price Momentum and Shareholder Returns

The stock has defintely had a good run, but it still hasn't hit its full potential. Over the last twelve months leading up to November 2025, Autoliv, Inc.'s (ALV) stock price delivered a total shareholder return of approximately 26.78%. That's a strong performance, beating both the US Auto Components industry and the wider US Market returns. The 52-week price range tells the story of this recovery: the stock climbed from a low of around $75.49 to a high of nearly $129.57. The last reported closing price was around $120.76.

The company's commitment to returning capital is also a clear signal of financial health. Autoliv, Inc. (ALV) paid a dividend of $0.85 per share in Q3 2025, which was a 21% increase from the prior quarter. They've also announced a further 2% increase for the fourth quarter, bringing the dividend to $0.87 per share. This stability results in a current dividend yield of approximately 2.8%, with a very sustainable payout ratio of just 30% of earnings.

Analyst Consensus and Price Targets

The Street is mostly on board with the bullish case. The analyst community has a consensus rating of Moderate Buy for Autoliv, Inc. (ALV). This rating is based on the views of eighteen research firms, with ten giving a 'Buy' and two a 'Strong Buy' recommendation. Only six firms suggest a 'Hold,' and zero recommend selling.

Here is a summary of the key valuation metrics and analyst outlook:

Wall Street's average price target sits around $139.42, suggesting an expected upside of over 15% from the current price. Separately, a Discounted Cash Flow (DCF) model estimates a fair value of $136.22, suggesting the stock is currently undervalued by about 11.3%. This convergence of valuation models and analyst ratings strongly suggests that Autoliv, Inc. (ALV) is trading at a discount to its intrinsic value. You can read more about this in Breaking Down Autoliv, Inc. (ALV) Financial Health: Key Insights for Investors.

Risk Factors

You need to look past Autoliv, Inc.'s (ALV) record Q3 2025 sales of $2.706 billion and focus on the structural risks that could derail its long-term 12% margin target. The core issues are persistent margin pressure from cost inflation, the complex challenge of underperformance in the crucial China market, and the ever-present cyclicality of the global automotive industry.

Honestly, no company in the auto supply chain is immune to macro swings. Autoliv, Inc. is a strong player, but its stock's beta of 1.36 tells you it is defintely more volatile than the broader market, so expect bigger swings.

External and Industry Headwinds

The biggest external risk is the cyclical nature of Light Vehicle Production (LVP). Autoliv, Inc.'s revenue is directly tied to how many cars manufacturers build, and even with their strong Q3 2025 performance, global LVP fluctuations remain a sector-specific risk. Geopolitical uncertainty also complicates forecasting, as management noted in their Q1 2025 report.

A more concrete, near-term risk is the evolving tariff landscape. While the company has been successful in mitigating this, it's not a permanent fix.

• Managed to pass on most U.S. tariff costs to customers.
• Negative impact from U.S. tariffs was around 20 basis points on Q3 2025 operating margin.
• Global trade uncertainties still demand continuous footprint and sourcing adjustments.

Operational and Strategic Challenges

The strategic risk in China is significant. Despite organic sales growth to domestic Chinese OEMs being about 8 percentage points higher than the COEM LVP growth in Q3 2025, Autoliv, Inc. still underperformed in the region overall. This is due to a shift in LVP mix, where lower-content vehicles are outgrowing higher-content ones.

The margin pressure is another critical operational risk. In Q3 2025, a negative gross margin performance prompted management to cut the full-year gross margin guidance. This raises questions about cost structure and the timeline for achieving the long-standing 12% adjusted operating margin goal. They are currently guiding for a full-year 2025 adjusted operating margin of around 10-10.5%.

To counter this, the company is executing a clear strategy:

• Driving operational efficiency through cost reduction programs.
• Total headcount decreased by 6% in Q1 2025.
• Expecting a record number of new product launches to boost relative sales performance in China.

Financial Resilience and Liquidity Concerns

While Autoliv, Inc. maintains a strong balance sheet, some financial metrics suggest caution. The company's leverage ratio (net debt to EBITDA) of 1.3x is comfortably below its target limit of 1.5x, and operating cash flow is robust, guided at around $1.2 billion for the full year 2025. Still, liquidity is something to watch.

The current ratio of 0.95 and quick ratio (acid-test ratio) of 0.7 suggest adequate, but not abundant, short-term liquidity to cover obligations. Plus, the Altman Z-Score of 2.98 places the company in the 'grey area,' which indicates some financial stress, though not an immediate bankruptcy risk. It's a yellow flag, not a red one.

Here's the quick math on key financial health indicators:

For a deeper dive into who is buying and selling Autoliv, Inc. shares and why, you should read Exploring Autoliv, Inc. (ALV) Investor Profile: Who's Buying and Why?

Growth Opportunities

You're looking at Autoliv, Inc. (ALV) and asking the right question: where does a global leader in passive safety go from here? The direct takeaway is that Autoliv is leveraging its technology lead and its dominant market share-around 44% globally as of 2024-to capture growth in high-demand emerging markets and next-generation vehicle safety systems. This isn't just about selling more airbags; it's about selling more advanced, higher-value components.

For the full 2025 fiscal year, Autoliv guides for around 3% organic sales growth, which is solid given the market's volatility. More importantly, the company is projecting an adjusted operating margin between 10% and 10.5% and strong operating cash flow of approximately $1.2 billion. This shows a business that's not just growing sales, but also improving its profitability and cash generation.

Key Growth Drivers: Innovation and Market Expansion

Autoliv's future isn't tied to a single product, but to a portfolio of innovations that address the evolving automotive landscape. They hold over 12,000 U.S. patents, which is a significant competitive moat (a sustainable competitive advantage). This technical edge allows them to command better pricing power than many peers.

Their product innovation strategy is focused on new mobility challenges:

• Advanced Safety Electronics: A new joint venture with HSAE will focus on safety electronics, like Electronic Control Units (ECUs) for active seatbelts and hands-on detection systems.
• Next-Generation Occupant Protection: Developing systems for new seating configurations, such as the 'zero gravity design seat' and solutions for 45° reclined seats, often in collaboration with interior specialists like Forvia and Adient.
• Safety for New Mobility: Innovations extending safety to driverless vehicles, motorcycles, and bikes.

Market expansion is defintely centered on Asia. The growth in India, for example, is so strong that it accounts for about one-third of the company's total global organic growth.

Strategic Focus on China

China is a crucial battleground, and Autoliv is making big moves there. They are significantly outperforming the local market, with organic sales growth to Chinese Original Equipment Manufacturers (OEMs) running about 8 percentage points higher than the local light vehicle production (LVP) growth in Q3 2025.

This outperformance is supported by a major strategic initiative: a partnership signed in October 2025 with the China Automotive Technology and Research Center Co (CATARC). This collaboration is about more than just sales; it's about shaping the future of safety standards in China and supporting Chinese OEMs as they expand globally with world-class safety systems. You can read more about the company's core principles here: Mission Statement, Vision, & Core Values of Autoliv, Inc. (ALV).

Future Earnings Trajectory

The market is clearly optimistic about these growth drivers translating to the bottom line. Here's the quick math on analyst consensus earnings per share (EPS) estimates:

What this estimate hides is the operational risk from margin pressures, which led to a cut in the full-year gross margin guidance following Q3 2025 results. Still, the upward trajectory in EPS expectations, from an earlier FY2025 projection of $7.83, reflects growing confidence in Autoliv's ability to execute its strategy and pass on costs.

Your next step should be to monitor the Q4 2025 report for confirmation that the record number of new product launches expected in China are indeed bolstering sales and helping to mitigate those margin headwinds.